November 19, 2007
You can read URI's complaint here. I'll have full analysis tomorrow. But URI is claiming that section 8.2(e) of the merger agreement which limits equitable remedies to $100 million is only applicable if the merger agreement is terminated. For an explanation fo this legal argument see my prior post here
My gut reaction is that URI probably thought that that was what they agreed to but the agreement is quite unclear on this point, a likely result of hurried, and sloppy, drafting by the lawyers (sorry Simpson). URI clearly realized this a while ago and have been attempting to cover it up through significantly clearer proxy statement disclosure -- a point they make in the complaint. If you want to have fun do a search for specific performance and limited gurantee in the merger proxy statement. If it only it were written this way in the contract.
The bottom line is that the contract is unusually ambiguous on when URI can receive specific performance of the agreement and whether it is limited by the $100 million cap. And while I think URI has a good argument, the contract is so unclear that who is right will depend upon the parol evidence -- evidence outside the contract -- as determined by a judge in Delaware after full discovery. there will be no paper ruling here like in SLM. And even the quickest trial will be 6-9 months out. More tomorrow.
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